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E-commerce logistics : Challenges and the way ahead

A country with unique social, demographic and economic characteristics like India has come a long way in transformative stages of e-commerce industry. To enable the growth of the e-commerce retail industry, logistics being an order fulfilment arm is a crucial enabler and potential differentiator for e-commerce players to create unique experiences in attracting and retaining customer loyalty.

The logistics requirements of the e-commerce industry are constantly changing with the evolving with the business environment and necessities. However, in order to build a robust and responsive ecosystems, the logistics space will need to deal with some of the challenges. Here we look at the key issues faced by the e-commerce logistics industry:

Availability of talent across levels – One of the biggest challenges that the industry faces today is that logistics is perceived to be a low-talent industry. Notwithstanding the exceptional growth that e-commerce has made, it is challenging to find talent eager to engage in the logistics sector. The fundamental issues leading to the talent gaps in the sector are the unorganized nature of the industry, lack of an institutionalized skill development and availability of attractive alternate career options leading to instability. Another reason is that the ecommerce logistics service is relatively new and players are taking new developments in technology and automation in their stride. Hence, slow adaptation to technology and agile solutions by professionals has resulted in talent crunch in the e-commerce logistics sector. Today, the demands are met mostly with the home-grown talent.

As the industry moves towards an organised approach, the demand for trained talent is expected to further increase. With the expected build out by 2022, there would be a requirement of about 28.4 million skilled workforce needed in logistics sector. Some of the initiatives that the industry can look to adopt to close the widening skill gaps are – Creation of a robust institutional framework for creating logistics manpower, undertaking of initiatives towards a more organized industry and developing in-house talents by logistics companies to take up additional responsibilities within the organization with time.

Government regulations and policies – Economic policy of the government also determines whether the logistics sector will grow or be inhibited. The logistics space in the ecommerce industry in the past faced huge challenges due to cross-state transportation and fragmented tax system. The hurdles and complexities in the supply chain acts as a hindrance to efficiency in distribution and turnaround time thereby adversely impacting growth. However, with the impending implementation of the Goods & Services Tax, the industry will now stand to gain as it is expected to bring ease and simplicity in the chain and will help the industry move a lot towards progress. The Government is expected to bring policy driven initiatives around development of integrated logistics plans with the given infrastructure status to the logistics industry

Physical and Technology Infrastructure –The nature of ecommerce business model is related to time efficiency (customer promise on expected delivery date is ‘holy book’ for all ecommerce companies) and infrastructure is the foundation upon which the logistics industry rests, and at times it becomes difficult for logistics service providers to maintain this due to infrastructural issues. At present, physical infrastructure in certain locations are being stretched to perform beyond their capabilities. In addition, lack of policy framework towards addressing the need for logistics space across the country especially in major cities. However, with the Government’s keen focus on infrastructure development with special focus on creating logistics parks, road transport and highways, and since a vast majority of transportation in India is done via roads, this move is bound to be beneficial for the logistics sector besides exploring waterways through sea and rivers can be added advantage. There is a need to ramp up aviation infrastructure in creating much needed cargo space for movement of parcels. The automation process is yet another key challenge which Industry must quickly adopt to manage scale. The automatic parcel or bag sortation systems, conveyors and Material Handling Equipment are key to productive operations.

Technology has a significant and measurable impact on performance and sustainability of logistics industry. Mobile network connectivity is critical for real time tracking of transport vehicles and field executives as they operate in wider areas. It also helps in instant status updates on shipment delivery, failing which consumer experience may get affected. Since the order fulfilment processes of e-commerce require a system which is capable of syncing across various platforms, industry must look at investing in systems that enable automated smart tracking and real-time analysis at any time to contain unnecessary delays and errors during fulfilment, back to back validations and reconciliations. By bringing core technology competencies of devices, data and automation together, logistics companies can implement the automation technology to pick and move packages to various destinations, among several other applications that make processes faster and smoother.

High and Seasonal volume handling – Seasonal Sales and promotional campaigns form an integral part of ecommerce retail and more so around the festive season when shipment handling peaks for logistics companies. Lack of planning for this increased volume handling could lead to huge pile up of shipments resulting in back-logs which could further lead to extended post-peak season recovery period. Logistics companies use innovative approaches to handle volumes during the season by actively engaging with the Industry. The planning for seasons takes place as early as 6 months ahead of the season with great deal of workings on temporary hiring, space planning, resource mapping and network build-up. Therefore, before the onset of peak handling season companies must be ready with high capacities through data analytics forecasting customer demands and trends. In this manner, players can prioritize delivery and avoid wastage of resources and time, which might directly reflect in overall margins.

Cash on Delivery – The acceptance of electronic payments methods as well as credit card penetration is low in India. This has led to the adoption of Cash on Delivery services by e-commerce companies in order to increase the number of transactions and acquire first-time customers. This payment option is likely to remain a key mode of payment and could hold around 60 to 70 per cent share in total shipments orders going ahead, with the growth of e-commerce retail in tier-II, tier-III, tier-IV and rural locations. However, COD adds to the challenges of cash handling and possible pilferages. The industry must continue to stay focused in ensuring robust controls, tally, tracking and reconciliation plus validations mechanisms for sustainability. The COD management is one of the critical key business deliverable and need to be managed efficiently and guarded in ensuring timely remittances back to Customers by the promise, consistently. The logistics players will need to adopt and respond swiftly to alternate payments solutions in building overall ecosystem reliably.

While speed and reliability are critical for e-commerce companies to deliver consistent customer experience, innovations agile solutions in logistics are a key to keep pace with growing customer needs. The burgeoning growth of e-commerce industry will entail the definite need for quality logistics in fulfilling orders reliably, which will in turn spur the growth of the logistics sector. To conclude, being responsible partners in the development of e-commerce industry both ecommerce and logistics players will need to capture opportunities by expanding geographies targeting wide spread consumer inclusion and enhanced customer choices.